Tax Free Investments were introduced on 1 March 2015 as an incentive to encourage households to save.
Commonly referred to as a Tax Free Saving Account(TFSA), you don’t have to pay income tax, dividends tax or capital gains tax on the returns on these types of investments. Currently, each individual is limited to contributing R36 000 per annum, up to R500 000 over their lifetime.
There are many ways to make use of a TFSA, along with some that waste its usefulness. Here are some of the best ways to make the most of a TFSA account:
#1 - Invest it in local equities
Foreign equities do not recognise the benefits of the South African TFSA. Any benefits on foreign equities are determined by tax treaty agreements. If you invest it in local equities, you get the maximum benefits, no Ts & Cs.
#2 - Invest in dividend paying investments
You will save 20% on dividend withholding tax levied on dividends
#3 - Invest it in Property/REITs
As income from local Property/REIT investments is added to your total taxable income, and taxed at your marginal tax rate, you can save up to 45% on your property/REIT distributions
#4 - Invest in an interest bearing account
Once you have breached the interest income tax exemption, interest income is added to your total taxable income, and you are taxed at your marginal rate. Using an interest bearing TFSA can save you up to 45% in tax
#5 - Buy local bonds
Bonds earn you interest. As mentioned above, once you have reached the interest income exemption, you can avoid paying tax on the interest earned from bonds. will save you up to 45% on income tax
There you have it, 5 ways to maximise a TFSA facility
Do you have other ways to maximise a TFSA facility? Leave your comment below
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